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How near is peak gas?


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How near is peak gas?

  1. 1. How near is peak gas? Tim Guinness ERC and APPGOPO panel discussion April 28 2009
  2. 2. Proved natural gas reserves in 2007 Source: BP Statistical review of world energy; June 2008 (273 Tcf) (282 Tcf) (511 Tcf) (515 Tcf) (2,097 Tcf) (2,585 Tcf) <ul><li>Total proved reserves = 177 Tcm or 6,264 Tcf - equivalent to c 1.0 trillion barrels of oil </li></ul><ul><li>At current global consumption rate of 105 Tcf pa, this gives proved reserves a 60 year life </li></ul>
  3. 3. Distribution of proved natural gas reserves in 1987, 1997 and 2007 (in percentages) Source: BP Statistical review of world energy; June 2008 Big shift to Middle East – now 41% of natural reserves vs 29% in 1987 % % % % (3,774 Tcf) (5,172 Tcf) (6,263 Tcf)
  4. 4. <ul><li>The title page </li></ul>Hubbert’s original paper
  5. 5. Original Hubbert curves produced in 1956 for oil & gas <ul><li>Hubbert is best known for his predictions on peak oil (for US and world). However, he also estimated peak production for natural gas in the US. </li></ul><ul><li>Peak year for US gas production forecast as 1970 (same as oil) </li></ul>Source: Nuclear Energy and The Fossil Fuels (M.K. Hubbert, 1956) NATURAL GAS CRUDE OIL
  6. 6. Actual US gas results superimposed (in red) <ul><li>The US did peak for gas in 1973 (rather than 1970) although the rate much higher than forecast (21.7 Tcf vs 14 Tcf) </li></ul><ul><li>HOWEVER – the decline in production after 1973 was caused not by peak supply but by a peak in DEMAND </li></ul>Source: Nuclear Energy and The Fossil Fuels (M.K. Hubbert, 1956) US natural gas production peaked at 21.7 Tcf in 1973 Production back to 19.3 Tcf in 2007
  7. 7. <ul><li>The fall-off in natural gas supply in the US in the 1970s was a result of declining demand due to 1973-75 and 1979-83 recessions, particularly in the industrial sector </li></ul>US natural gas in 1970s held back by demand rather than supply Source: EIA
  8. 8. <ul><li>Hubbert’s original curves. He got: </li></ul><ul><ul><li>US oil - right </li></ul></ul><ul><ul><li>World oil – wrong </li></ul></ul><ul><ul><li>US gas – will ultimately be proved wrong </li></ul></ul><ul><li>Why did he get US gas wrong? </li></ul><ul><li>Peak production will occur around the time we have used half the original gas in place and that can be roughly calculated from dividing “how much is left minus half the original in place” by “the rate we are using it at per year” </li></ul><ul><li>Hubbert’s problem was he got the US’s original gas reserves in place badly wrong. He took Pratt’s assumption of 850 Tcf only. </li></ul><ul><ul><li>US has already consumed 1,160 Tcf and </li></ul></ul><ul><ul><li>have 211 Tcf in proven reserves (only), but also </li></ul></ul><ul><ul><li>huge discovered unproven (probable/possible) and undiscovered unconventional gas resources </li></ul></ul>Big picture Whether we are approaching peak world gas depends on correctly estimating how much original gas there was, and whether this gas is ultimately useable or stranded
  9. 9. Why might US gas production exceed the 1973 peak? <ul><li>The discovery and development of ‘unconventional’ gas resources in the US, as well as additional conventional resources, have proved Pratt’s estimate for total recoverable reserves of 850 Tcf to be far too low. </li></ul>Source: EIA & Bernstein estimates Conventional gas production (Bcf/day) Unconventional gas production (Bcf/day) Unconventional as % of total production: up from 18% in 1980 to 47% in 2008
  10. 10. World unconventional gas resources <ul><li>Whilst the US is thought to have the highest proportion of unconventional gas resources to current proved reserves, world unconventional resources are likely very high also. </li></ul><ul><li>There is a big question-mark, however, over the ultimate recoverability of these resources </li></ul>Source: Unconventional resources - National Petroleum Council (US); Proved gas reserves - BP Unconventional = 6x proved reserves 32,569 2,353 4,468 3,449 3,488 5,096 5,485 8,230 Total unconventional gas resources (Tcf) 7,406 1,176 1,607 1,293 705 353 901 1,371 Tight gas (Tcf) 6,223 863 2,822 2,117 2,313 3,528 627 3,842 Shale gas (Tcf) 6,223 593 3,086 270 88 400 1,575 211 Total proved gas reserves (Tcf) 470 Pacific OECD 3,957 FSU 39 Middle East & Africa 39 Latin America 1,215 Central Asia & China 9,051 TOTAL 314 Europe & other 3,017 North America Coalbed methane (Tcf)
  11. 11. <ul><li>Approximately 50% of the world’s proven natural gas reserves (c. 3,000 Tcf) can be classified as “stranded” gas: using existing technology, this gas cannot be commercialised. The same is probably true for a high proportion of undiscovered reserves. </li></ul><ul><li>There are a number of known technologies which may bridge this gap – the fastest growing being liquified natural gas (LNG) </li></ul>How accessible are existing and future gas reserves?
  12. 12. <ul><li>LNG accounted for around 8% of world natural gas production in 2007 </li></ul><ul><li>Shell predict LNG’s share of production to increase to 15% by 2020 </li></ul>Growth of LNG – key to developing a global gas market Global LNG flows: 2007: 7.5 Tcf per annum 2020(e): 22.5 Tcf per annum 3x per annum in 2007 Source: BP; 2020 LNG estimate: Shell
  13. 13. Back to Hubbert – how much gas has been produced to date? Source: BP Statistical review of world energy; June 2008 3,093 TOTAL c.500 Pre 1968 401 1968 – 1977 546 1978 – 1987 729 1988 – 1997 917 1998 – 2007 Tcf World natural gas production
  14. 14. <ul><li>I think a reasonable guess is: </li></ul><ul><li>We are using natural gas at a rate of 105 Tcf/year (284 Bcf/day x 365) so this gives 43 to 72 years until 50% is consumed ( ignoring growth). </li></ul>Hubbert’s approach of estimating total resources for US oil/gas can be used for world natural gas also: 21,323 Tcf 15,323 Tcf Total original in place 7,561 Tcf 4,511 Tcf Left to go for 50% of original consumed 10,661 Tcf 7,611 Tcf 50% of original in place HIGH CASE LOW CASE 6,223 Tcf Proven Reserves (BP Statistical survey 2008) 3,100 Tcf Used to date 6,000 Tcf 3,000 Tcf Undiscovered 6,000 Tcf 3,000 Tcf Discovered unproven
  15. 15. <ul><li>I think a reasonable guess is - </li></ul><ul><li>In round figures Natural gas peak likely to be around 2050-2085 (ie in 40-75 years from now) away depending on initial total reserves (whether 15,000 Tcf or 23,000 Tcf) </li></ul>My peak gas prediction: HIGH CASE LOW CASE 2081 2052 Year that 50% of total recoverable resource is used up
  16. 16. <ul><li>I am a peak natural gas-ist but of the weaker variety </li></ul><ul><li>I predict a peak in world gas production in 40 – 75 years </li></ul><ul><li>To me, 40-75 years is somewhere between a half and a full lifetime only </li></ul><ul><li>I strongly favour policies to encourage the development of alternative energy and a rapid increase in nuclear energy and a move to electricity-based transport (e.g. plug-in hybrids / trains) so we can eke-out the remaining gas and oil for longer </li></ul><ul><li>To those who say alternative energy is expensive relative to hydrocarbon energy I say it is, but only because we put no cost or value on using up hydrocarbons that took 110 – 120 million years to cook. A lump of coal on the surface is treated as “costing” nothing. </li></ul>Personal conclusions / opinions (1)
  17. 17. <ul><li>Some projections forecast gas-based electricity providing 70% of the UK’s electricity. From a peak gas perspective, this is unappealingly short-termist. </li></ul><ul><li>In the UK we should focus particularly on the development of our offshore wind assets . This requires more energetic provision of subsidies (including state provision of transmission infrastructure to points on the coast near suitable offshore wind farm sites). </li></ul><ul><li>A second and third focus could usefully be on helping the development of wave/tidal energy assets and encouraging the development of geo thermal energy. We should aspire to nurture global winners in these three industries as Germany has done in solar. </li></ul><ul><li>A simple carbon tax is plus generous long term feed in tariffs seem to me much the best way to go. Cap and trade won’t work. Bureaucrats & politicians mess it up and its too uncertain. Clarity, generosity and certainty will best enable policy objectives to be met. </li></ul>Personal conclusions / opinions (2)
  18. 18. Thank You! Tim Guinness
  19. 19. World natural gas proved reserves:1987 vs 2007 (up 65%) Source: BP Statistical review of world energy; June 2008 1,575 1,386 Russian Federation 341 335 Other Americas 510 261 Africa 6,223 488 2,576 522 211 Proved reserves 2007 (Tcf) 1,101 Middle East 205 Europe & Eurasia (ex Russia) 3,773 TOTAL 298 Asia Pacific 187 US Proved reserves 1987 (Tcf)
  20. 20. Production of natural gas by region: 1982 - 2007 Source: BP Statistical review of world energy; June 2008
  21. 21. Long-term trends: world energy consumption growth and efficiency metrics <ul><li>Key observations 1980 – 2006 </li></ul><ul><li>World GDP Growth 3.0% pa </li></ul><ul><li>World Energy Consumption Growth 1.9% pa </li></ul><ul><li>World Oil Consumption growth 1.0% p.a. </li></ul><ul><li>ENERGY GREW 1.1percentage points p.a. less than GDP </li></ul><ul><li>OIL GREW 1.9 percentage points p.a. less than GDP </li></ul><ul><li>Energy use efficiency improved 24% (energy/$GDP(real)) </li></ul><ul><li>Oil use efficiency improved 39% (oil/$GDP(real)) </li></ul><ul><li>For renewables to contribute 10% they need to be 7.97 billion boe or 558.8GW* at 100% utilisation </li></ul>Source : BP Statistical Review 2007; World Bank *1 million tonnes of oil equivalent produce approximately 4500 GWh of electricity in a modern power station
  22. 22. World energy demand growth – long-term trends <ul><li>Oil was 46.3% 1975. Down to 35.6% in 2007; Oil is mostly used for transportation. </li></ul><ul><li>Natural gas was 18.7% in 1975; Up to 23.8% in 2007. </li></ul><ul><li>Note displacement of oil by coal, nuclear and natural gas. </li></ul>Source : BP Statistical Review 2008, Guinness Asset Management